[The Following Information Applies to the Questions Displayed Below

question 79

Multiple Choice

[The following information applies to the questions displayed below.]

On January 1, Year 2 Grande Company had a $16,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $104,000 of service on account. The company collected $97,000 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account.


-What is the amount of uncollectible accounts expense recognized on the Year 2 income statement?

• A)$320
• B)$1,000
• C)$2,080
• D)$1,940

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Definitions:

Contribution Margin Ratio

A financial indicator that measures how a product's selling price exceeds its variable costs, expressed as a percentage.

Revenue Remaining

The amount of income that remains after subtracting costs and expenses from the total revenue.

Relevant Range

The span within which the assumptions about fixed and variable cost behaviors are valid.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.